CBP provided some details in a May 9 CSMS message on how importers should file entries that will be subject to the increased Section 301 duties on goods from China. The CSMS message confirms that the increased duties will only apply to goods exported and entered after May 10 (see 1905080035). During a call with software developers the same day, CBP officials explained that several pieces are still being worked out, including the addition of a tariff subheading for goods exported before May 10 and entered after the tariffs take effect.
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
Some firms have moved contract production out of China, even though the items they import were only subject to a 10 percent tariff, according to Meredith DeMent, a senior associate in the international commercial practice at Baker McKenzie. DeMent said she personally has seen more than 10 companies move at least some production to other countries. But, she said, many were thinking that their goods might return to Most Favored Nation tariff levels soon, because news reports suggested the U.S. and China were headed toward a deal that would at least have "a phased scaling back of the tariffs."
The Office of the U.S. Trade Representative notice on the increase in Section 301 tariffs for the third tranche of goods from China (see 1905080004) mentions that a new exclusion process will be coming for that group of products. The notice, which said that the tariffs will go from 10 percent to 25 percent for the third list of goods from China at 12:01 a.m. on May 10, also seems to indicate some differences from previous tariff implementation instructions on the timing.
The Office of the U.S. Trade Representative is set to publish on May 9 a notice on the increase in Section 301 tariffs for the third tranche of goods from China. The tariffs will go from 10 percent to 25 percent for the third list of goods from China at 12:01 a.m. on May 10, the USTR said. That increase was previously delayed while negotiations with China were underway. China's Vice Premier Liu He will be in Washington for further discussions this week "to make a deal," President Donald Trump said in a May 8 tweet.
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, is now saying it's not his stubbornness on getting Mexican and Canadian retaliatory tariffs lifted that stands in the way of the Senate ratifying the new NAFTA. He said he's looking for "any way of moving ahead," but added, "let’s just assume that Chuck Grassley said that we ought to go ahead, regardless of whether the tariffs come off, it isn't going to happen. ... You're never going to get the 51 votes through the United States Senate" in that scenario, he said.
International Trade Today is providing readers with some of the top stories for April 29 - May 3 in case they were missed.
After a day when the stock markets responded as if President Donald Trump's May 5 tweet about raising tariffs on Chinese goods was an empty threat, U.S. Trade Representative Robert Lighthizer told reporters from a number of national outlets that the new tariff rate -- jumping from the current 10 percent to 25 percent -- would take effect at 12:01 a.m. on May 10.
The third tranche of Section 301 tariffs on goods from China will go up to 25 percent on May 10, President Donald Trump tweeted on May 5. "For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods," he said. "These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. " That increase was previously set to take place at the beginning of 2019, but was pushed back as the U.S. and China negotiated.
U.S. Trade Representative Robert Lighthizer said there will be an exclusion process for the third tranche of Section 301 tariffs on products from China and that the agency has "begun preparations to launch a process by the end of the month." His comment came in written replies submitted in recent weeks to Rep. Suzan DelBene, D-Wash., after a House Ways and Means Committee appearance in February. He had previously argued no exclusions were needed for the 10 percent tariffs despite urging from Congress.
U.S. Trade Representative Robert Lighthizer told one Democrat the agency would be starting a Section 301 exclusion process for the largest, third tranche of goods subject to tariffs by the end of April (see 1905020030), but he avoided committing to finishing evaluations of pending exclusions once tariffs are lifted. "USTR will consider all options in the event tariff rates are modified," he wrote to Rep. Jackie Walorski, R-Ind. No exclusion process has launched, even though the April 30 target has passed. USTR's spokeswoman did not respond to a question by press time about when it might launch. All of Lighthizer's responses were posted April 24 as an addendum to the February hearing's transcript.